Which Peer Group to Choose? The Effects of Relative Performance Information on Employee Self-Selection and Performance

Petra Nieken and Anna Ressi

No 9940, CESifo Working Paper Series from CESifo

Abstract: This paper reports results of two controlled experiments on the behavioural effects of relative performance information (RPI) in different organizational structures. Our baseline study 1 focuses on a centralized organizational structure where employees are exogenously assigned to either a high-performing or a low-performing peer group. We find that RPI boosts performances when employees are assigned to the low-performing group. In contrast, when assigned to the high-performing group, our results point to a discouragement effect of RPI that can be attributed to low-performers. In study 2, we show that this or similarly undesired effects do not play a crucial role under a decentralized organizational structure where employees can self-select. In fact, we demonstrate that RPI especially induces employees with a relatively low performance to voluntarily choose the high-performing group. Analyzing subsequent performances suggests that providing self-selection options allows employees to use the high-performing group as a self-set target to spur motivation.

Keywords: peer groups; self-selection; reference points; relative performance information (search for similar items in EconPapers)
JEL-codes: C91 D83 D91 M52 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-exp, nep-hrm and nep-net
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_9940

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